EDWARD JELLEN, Chief Judge
On October 9, 2007, Sara L. Kistler, Acting United States Trustee (the "Trustee") moved to dismiss the above-captioned chapter 7 case. The Trustee contends that granting relief to Debtors Nestor Castillo Cayanan and Emiliana Cunanan Cayanan ("Debtors") would be an abuse of the provisions of chapter 7, which therefore merits a dismissal under Bankruptcy Code § 707(b)(2) (presumption of abuse under the "means test") and § 707(b)(3) (totality of the circumstances shows an abuse). The court heard the matter on March 27, 2008. Both the Trustee and Debtors appeared through counsel. The court will deny the Trustee's motion under § 707(b)(2), but grant the Trustee's motion under § 707(b)(3).
On July 27, 2007, Debtors filed a petition for relief under chapter 7 of the Bankruptcy Code. Along with their petition, Debtors filed a statement of financial affairs and Form 22A ("original Means Test"). On September 14, 2007, Debtors filed an amended Form 22A ("amended Means Test"). On March 20, 2008, Debtors filed a second amended Form 22A ("second amended Means Test"). On March 28, 2008, after the hearing on the Trustee's motion to dismiss, Debtors filed an amended statement of financial affairs.
The Trustee seeks to dismiss this case under § 707(b)(2), arguing that the case is presumptively abusive and Debtors have not rebutted the presumption. She bases her analysis on Debtors' amended Means Test, which shows an abuse. Debtors argue, however, that the income figures therein were in error, and that the correct figures, as set forth in the second amended Means Test, should control. Under these corrected figures, no presumption of abuse arises.
The court agrees with Debtors. The court cannot use the original Means Test, as it incorrectly stated that this is a business case. The amended Means Test correctly states that this is a consumer case, but incorrectly lists Debtors' rental income. The Trustee has not presented any evidence disputing the information in the second Means Test, and has had ample opportunity to obtain and either challenge or verify the accuracy of such information. Therefore, the Trustee's motion to dismiss under § 707(b)(2) will be denied.
The Trustee also seeks to dismiss this case under § 707(b)(3) following a totality of the circumstances analysis. Section 707(b)(3) states in relevant part, "In considering . . . whether the granting of relief would be an abuse . . . the court shall consider whether . . . the totality of circumstances . . . of the debtor's financial situation demonstrates abuse." Both parties agree that the court may look at pre-petition conduct when determining whether the case is abusive.
The court notes that § 707(b)(3) also contains a provision dismissing a case filed in bad faith. That issue was not raised by the Trustee nor briefed by either party, so the court will not address it.
Debtors' pre-petition conduct indicates that they were spending recklessly and without regard to either their deteriorating financial situation or their creditors. Within two years of filing their petition, Debtors refinanced four of their five houses. Of the approximately $1,850,000 Debtors took out in loans, the Trustee argues that Debtors may have received as much as $313,000 in cash. Debtors do not deny receiving that money. Of major importance to the court in reaching its decision are the facts that (a) Debtors failed to disclose those refinances until after the hearing when they filed their amended statement of financial affairs, and (b) they have yet to account for the $313,000.
Some of the funds may have been put toward Debtors' purchase of an $85,000 Mercedes in November of 2006. The Mercedes purchase occurred just six months before the Debtors' house in Brentwood was sold at Trustee's sale. By the end of June 2007, four of Debtors' five houses had been foreclosed on. The purchase of a luxury vehicle when Debtors had to have known that they could not afford their house payments is not the conduct of an honest but unfortunate debtor, but rather someone attempting to abuse the system.
This vehicle was just one of five vehicles Debtors owned at the time they filed their petition.
It is true that when Debtors filed this petition under chapter 7, they were not eligible for chapter 13. It is also true that Debtors may not be able to propose a feasible chapter 11 plan, given their current income and expenses. Even so, the court believes that the totality of the circumstances, as described herein, dictates dismissal. The court will therefore issue its order granting the Trustee's motion.